One of the most important steps to build wealth or accomplish any major money goal is to have at least a basic foundation of financial literacy. The question is, where do you get that education?
Some states are stepping in to make sure the next generation is equipped to navigate the world with a solid understanding of credit, debt, budgeting, investing and more.
As of this year, 18 states guarantee some form of personal finance education before students graduate, according to Next Gen Personal Finance (NGPF), a nonprofit that provides educational resources and advocates for financial literacy in schools.
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The growing trend of personal finance education legislation has brought the percentage of high schoolers guaranteed to take a personal finance course up to 40.5% in 2023, compared with 22.7% of students in 2022, according to NGPF.
Personal finance is a huge umbrella. Deciding the most important, relevant and engaging topics to teach students as young as kindergarten is no easy feat. Across the country in schools and other educational organizations, teachers and economic professionals are figuring out the best ways to teach kids about money.
Setting the standards
When it comes to mandating personal finance education, it's not as simple as legislators or school boards agreeing that there need to be courses available. Much work has gone into developing standards for each state that school districts then use to develop curriculum to teach the required material.
Along with advocating for personal finance education in schools, organizations like NGPF and the Council for Economic Education work to develop standards they feel will best equip students with necessary and relevant financial education.
The National Council for Economic Education identifies six critical topic areas in their personal finance standards:
- Earning income
- Spending
- Saving
- Investing
- Managing credit
- Managing risk
Developing the local standards can come down to "whoever's in the room," according to Chris Cannon, chief program officer at the Georgia Council on Economic Education, who worked on Georgia's personal finance education standards.
"We sort of sit around and say, 'Alright, what is it about budgeting you think every kid needs to know? Give us the laundry list,'" Cannon tells CNBC Make It. "And then we can't teach all that, so we say, 'What are the basics?'"
NGPF also works on the policy side to help ensure when states are mandating personal finance education, they're doing so effectively. Along with proposing course topics, they endorse semester-long, standalone personal finance courses, rather than just requiring that some financial concepts be taught within a math, economics or other class.
As of March 2023, about 24% of students go to schools that uphold the "gold standard" of personal finance education, according to NGPF, where it's both required and comprehensive.
In order for [a personal finance course] to be comprehensive, actionable and relevant, it has to include everything — banking, budgeting, investing, taxes, insurance, paying for college.
Yanely Espinal
director of educational outreach at NGPF
"In order for [a personal finance course] to be comprehensive, actionable and relevant, it has to include everything — banking, budgeting, investing, taxes, insurance, paying for college, it has to include credit scores," Yanely Espinal, director of educational outreach at NGPF tells CNBC Make it. "There's no way that you can do all of that in just a couple of weeks of another class."
It starts with decision-making
Despite different standards and course descriptions, educators from various locations generally agree that teaching students how to make thoughtful decisions is at the heart of all personal finance education.
"The biggest single theme by far is decision making — weighing costs, benefits, marginal cost, marginal benefits and thinking through future consequences as best you can," Cannon says. "That theme is really a theme of the economics discipline, and we view personal finance as an extension of economics."
There are plenty of nitty-gritty topics to get into within personal finance from understanding the power of compound interest to knowing the challenges of adjustable-rate loans. Cannon and other experts say decision-making provides a framework for students to get into those deeper topics on an as-needed basis.
Not every student will go to college, for example, but all students should be equipped to make that decision after weighing the costs and benefits.
"Personal finance instruction includes teaching things like managing a budget, picking stocks, diversifying your investment portfolio and insurance, and those things are really important to learn, but they're not particularly relevant to 16- or 17-year olds, let alone middle schoolers or elementary school students," Scott Wolla, economic education officer at the Federal Reserve Bank of St. Louis tells CNBC Make It.
"But really, everyone makes decisions every day and many of those decisions are financial decisions."
Correction: This story has been updated to reflect the the correct spelling of Yanely Espinal.
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